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Against this background, the risks in the outlook for prices also seemed to be tilted toward somewhat higher inflation. | 1,997 | 1 |
Instead, I would like to address a separate but not unrelated topic, the interaction of bank supervision and regulation with monetary policy, and how supervision and regulation might work to make monetary policy implementation more effective in the current environment, particularly as it relates to a bank's demand for reserves.2 But first, let me start with a brief take on the current economic outlook. | 1,998 | 2 |
The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash. | 2,001 | 2 |
We take the level of the stock market into account when we consider the economic outlook and monetary policy. | 2,003 | 2 |
Nonetheless, participants generally saw the unemployment rate as still elevated and were not yet confident that the recent progress toward the Committee's employment objective would be sustained. | 2,019 | 0 |
Most FOMC participants anticipate that inflation will gradually move up to the FOMC's 2 percent target over coming years. | 2,013 | 0 |
Most other interest rates in short-term markets were little changed over the period. | 2,021 | 2 |
Some evidence exists that quantitative easing can stimulate the economy even when interest rates are near zero; see, for example, Christina Romer's (1992) discussion of the effects of increases in the money supply during the Great Depression in the United States. | 2,017 | 0 |
At the time, we could only observe outcomes that did not fit with preconceptions; try to find rationales that explained what we were seeing; and in the process, derive implications about the future that could be used to guide a forward-looking monetary policy. | 2,022 | 2 |
However, a couple of participants noted that the recent oil price decline could also be associated with increasing oil supply rather than softening global demand. | 1,996 | 0 |
Core consumer price inflation continued to slow, and inflation expectations remained subdued over the closing months of 2003. | 2,000 | 0 |
The forecast for headline inflation was in the same range as that for core inflation in 2008 and 2009, reflecting expectations that energy prices would level off and then turn down and that increases in food prices would slow to a pace more in line with core inflation. | 2,007 | 2 |
Later in the week, however, market interest rates moved up in response to the release of the minutes of the February meeting and the mention therein of some sentiment for a larger policy tightening than had been undertaken. | 2,022 | 1 |
Another difficulty in assessing the current amount of slack in the economy, and a third uncertainty, concerns the divergent patterns in alternative measures of excess demand. | 2,006 | 2 |
A couple of participants noted that uncertainties concerning both the level of, and the source of shifts in, potential output made it difficult to base decisions about monetary policy on real-time measures of the output gap. | 2,011 | 2 |
Signs of an actual change in inflation were still quite tentative and anecdotal, and they did not warrant an adjustment to policy at this meeting. | 2,003 | 2 |
If we—if we analyze inflation data and conclude that, clearly, transitory influences are holding down inflation, I do not want to say that we would respond to that. | 2,021 | 2 |
Of course, we can’t do anything about long-run employment opportunities, but we can help the economy recover more quickly. | 2,021 | 0 |
However, a few participants expressed concern that higher household wealth might not translate into greater consumer spending, cautioning that household income growth remained slow, that households might not treat the additions to wealth arising from recent equity price increases as lasting, or that households' scope to extract housing equity for the purpose of increasing their expenditures was less than in the past. | 1,998 | 2 |
More broadly, post-crisis monetary policy supported asset values, reduced interest payments, and increased both employment and income. | 1,997 | 0 |
I strongly supported the FOMC's decision last week, and I expect to support additional rate increases until we see significant progress toward bringing inflation down. | 2,001 | 1 |
In the past, a reasonable goal might have been to maintain a zero deficit in our on-budget accounts--those accounts that exclude the Social Security and Medicare surplus--and to begin a serious discussion of reforms to Social Security and Medicare to bring them closer into actuarial balance. | 2,021 | 2 |
Housing demand and consumer spending firmed toward the end of the year, but capital spending remained quite weak in an environment of substantial business uncertainty and pessimism. | 2,020 | 0 |
During much of the recovery, forecasters have been overly optimistic about growth but too pessimistic on job creation and the decline in the unemployment rate. | 2,017 | 2 |
Moreover, economic theory indicates that the equilibrium level of short-term real interest rates would likely remain low relative to estimates of its level before the financial crisis if trend growth of total factor productivity does not pick up and if demographic projections for slow growth in working-age populations are borne out. | 2,003 | 0 |
The implications of the spread of e-money for monetary policy would arise from the substitution of e-money for both currency and deposits, shrinking the size of the monetary base. | 2,004 | 0 |
Several participants noted the increase in agricultural crop prices over 2020 and the associated improvement in farm revenues. | 2,017 | 2 |
Because long-term interest rates can remain low only in a stable macroeconomic environment, these goals are often referred to as the dual mandate; that is, the Federal Reserve seeks to promote the two coequal objectives of maximum employment and price stability. | 2,007 | 2 |
At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. | 1,999 | 1 |
Less uncertainty about future inflation could lower the risk premiums on nominal Treasury bonds, lowering the risk-free interest rate. | 2,005 | 0 |
Some participants stated that low interest rates appeared to be contributing to strong sales of autos or, more generally, of consumer durables. | 2,009 | 2 |
The Fed's credibility, earned over decades of low inflation, is a powerful policy tool that is critical to our long-term success. | 2,007 | 2 |
Nevertheless, the path of inflation is the biggest risk to my outlook. | 1,999 | 1 |
The strength in corporate profits in the first quarter not only impressed economists, but it also impressed investors, who drove stock prices up earlier this year. | 2,001 | 2 |
Most other market interest rates declined further on balance over the period in an atmosphere of greater volatility in financial markets. | 2,021 | 0 |
If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. | 2,015 | 1 |
Several participants observed that the trimmed mean measure of PCE price inflation constructed by the Federal Reserve Bank of Dallas had stayed near 2 percent recently, underscoring the view that the recent low readings on inflation will prove transitory. | 2,017 | 2 |
In the absence of such offsetting operations, a decrease in currency demand would raise the amount of reserves and hence lower the federal funds rate. | 2,000 | 0 |
Central banks generally appear to have embraced a common model of the channels through which monetary policy functions, although the specifics and emphasis given to those channels vary according to our particular circumstances. | 1,997 | 2 |
Put another way, the FOMC could have "preemptively" tightened monetary policy, based on forecasts, but recognizing the uncertainties about empirical relationships chose not to do so. | 2,000 | 2 |
The uncertainty about the threshold unemployment rate also suggests a differing degree of intensity in the response of monetary policy to deviations of inflation and output to their respective targets. | 2,021 | 2 |
Participants noted the considerable uncertainty surrounding estimates of the output and unemployment gaps and the extent of their effects on prices. | 2,011 | 2 |
By getting unemployment down, we hope to bring back to work some of the people who’ve been out of work as long as they have and, in that respect, try to avoid the longer-term consequences of people being out of work for months at a time. | 2,017 | 0 |
I would say, in the area of commercial real estate, while valuations are high, we are seeing some tightening of lending standards and less debt growth associated with that rise in commercial real estate prices. | 2,016 | 1 |
It also affects stock prices. | 2,018 | 2 |
That is a positive for growth. | 2,016 | 2 |
So in—in—in U-6, the U-6 level of unemployment has tripled from 7 percent to 21 percent. | 2,016 | 0 |
There’s a lot more demand for risk sharing, for liquidity services, and so on. | 2,015 | 2 |
In the absence of legislation, going appreciably further in the direction of prioritizing price stability, as would be implied by a numerical target that was expected to be achieved most of the time, would be potentially damaging to the democratic balance and would risk a backlash. | 2,022 | 0 |
And, in my judgment, we may have to rely more on measures other than apparent excess demand to get reliable indications of pending changes in inflationary pressures. | 2,000 | 2 |
That projection, along with the path to year-three inflation, should help the public differentiate short-term shocks to price stability from the longer-term price trends it should use for planning purposes. | 2,007 | 2 |
Answering this question is central to our outlook for both of our dual-mandate goals of maximum employment and price stability. | 2,022 | 1 |
As of this month, the maximum monthly reduction in the balance sheet will be nearly double the level of the previous cycle.10 Together, the increase in the policy rate and the reduction in the balance sheet should help bring demand into alignment with supply. | 2,022 | 1 |
And as reserves reach durably ample levels, we intend to slow the pace of purchases such that our balance sheet grows in line with trend demand for our liabilities. | 1,998 | 1 |
This information helps Committee members deduce how their own actions and statements are likely to affect asset prices and yields. | 2,003 | 2 |
But even for many other workers, a rapidly evolving work environment in which the skill demands of their jobs are changing can lead to very real anxiety and insecurity about losing their jobs. | 2,021 | 2 |
In some models, these factors can be explicitly tied to observable economic variables, such as inflation; in other models, the factors represent statistical summaries of the data and have no explicit economic interpretations. | 2,021 | 2 |
Implications for Monetary Policy In summary, there appears to be some possibility that the recent trend toward disinflation will continue, primarily because of the potentially large amount of economic slack in the system. | 2,019 | 0 |
In the 1988-90 period, the behavior of crude oil prices, unemployment, and the exchange rate were not especially surprising or anomalous. | 2,022 | 2 |
It will likely take even longer than that for the unemployment rate to return to a level consistent with our maximum-employment mandate. | 2,000 | 0 |
Another example of deficit targets comes from the balanced-budget requirements of the states, which can be viewed as deficit targets with the target set at zero. | 2,006 | 2 |
But if our assessment is correct that inflation is temporary, it would be unwise for us to take actions that might slow the recovery prematurely by trying to stay ahead of inflation, when our best estimate is that we are not far behind. | 2,000 | 0 |
To be sure, financial market signals are noisy, and day-to-day movements in asset prices are unlikely to tell us much about the cyclical or structural position of the economy, let alone r* and expected inflation. | 2,022 | 2 |
Moreover, monetary policy actions addressed at a perceived bubble in one sector may have undesirable effects on other asset prices and the economy more generally. | 2,006 | 0 |
The implication is that monetary policy is already well positioned to slow the expansion. | 2,004 | 1 |
During expansions, equity prices tend to rise, although they often decline before a downturn in the economy. | 2,017 | 2 |
An extreme version of this view is that bubbles probably do not exist--that rational market processes always price assets at their fundamental value. | 2,004 | 2 |
With regard to our price-stability mandate, while the new statement maintains our definition that the longer-run goal for inflation is 2 percent, it elevates the importance—and the challenge—of keeping inflation expectations well anchored at 2 percent in a world in which an effective-lower-bound constraint is, in downturns, binding on the federal funds rate. | 2,000 | 1 |
To quantify the importance of the shift in the balance of demand and supply and of the consequent change in the term premium, we can appeal to the research literature on the term structure of interest rates. | 2,003 | 2 |
A particular phenomenon that touches on all these issues is the movement of asset prices, especially the prices of equities and residential real estate. | 2,004 | 2 |
The corresponding depreciation in other countries currencies will result in a gradual increase in the foreign currency price of U.S. exports, compared to the prices of foreign produced goods. | 2,004 | 0 |
Second, the correction in equity prices points to a downward revision to consumer spending and to business fixed investment and residential construction as well. | 2,006 | 0 |
In the labor market, about half of the 22 million jobs that were lost in the spring have been restored, and the unemployment rate has fallen since April by nearly 7 percentage points to 7.9 percent as of September. | 2,000 | 0 |
In addition to the headwinds facing demand, there could be persistent effects on the supply side of the economy. | 2,021 | 0 |
If the FOMC were to tie mechanically our actions to market prices, then we would be placed in the sorry position of validating whatever whim that currently struck investors' fancy. | 2,006 | 2 |
Here in the United States, my colleague Governor Mike Kelley has stated that we are likely to see some disruptions to economic activity because of Year 2000 problems but the effects are likely to be temporary and quickly reversed. | 1,999 | 2 |
In particular, the Committee noted that it would respond as necessary to maintain price stability. | 2,021 | 1 |
For instance, monetary policymakers must accurately assess how disasters such as hurricanes, wildfires, and flooding affect labor markets, household and business spending, output, and prices.7 In deciding whether to alter monetary policy or, instead, to "look through" such shocks, policymakers need to assess the likely persistence of the effects and how widespread they are. | 2,020 | 2 |
But this belief will persist only as long as we on the Federal Open Market Committee continue to ratify the public’s expectations that inflation will remain low and stable. | 2,006 | 1 |
As students of economics, you may already know that the Federal Reserve conducts monetary policy to support a strong and stable economy in the United States. | 2,022 | 2 |
There is, to be sure, no trade-off and hence no inconsistency between full employment and price stability in the long run. | 2,005 | 2 |
Concepts associated with deflation such as liquidity traps and the zero bound on nominal interest rates had, for practical purposes, disappeared from economic thought. | 2,008 | 1 |
First, insofar as recent productivity growth is concerned, I have a serious question about the quality of the data that we employ to measure output in today's economy. | 2,005 | 2 |
White-collar, high-skilled employment increased at a much faster rate than employment in the other categories in nearly all cases in the G-7 countries over 1979-95. | 2,017 | 2 |
Price shocks. | 2,005 | 2 |
Other economies, such as Argentina and Hong Kong, have fixed their exchange rates essentially through currency boards. | 2,002 | 2 |
But dividing that nominal value change into components representing changes in real quantity versus price requires that one define a unit of output that is to remain constant in all transactions over time. | 2,021 | 2 |
Additionally, can one make any other generalizations concerning recessions that follow asset-price booms and busts and how they differ from other recessions? | 2,001 | 2 |
In terms of missing on inflation, policymakers' projections looked very much like most of the public's. | 2,021 | 2 |
This approach adds to what we have learned from earlier papers that have examined the performance of unconventional policy tools with respect to individual components of financial conditions—most notably, long-term sovereign yields, but also mortgage rates, equities, exchange rates, and corporate debt spreads.3 Empirically assessing the question in the report is not only important, but also challenging, as the report readily acknowledges. | 2,021 | 2 |
First, the significant appreciation of the dollar over the last two years has clearly had an important restraining effect on U.S. inflation, both via the direct effect on the prices of imported goods and on the pricing power of domestic firms producing import-competing goods. | 2,001 | 0 |
Under this interpretation, the lower line in the bottom panel of Figure 1 is an estimate of market inflation expectations over the next five years, and the upper line represents five-year forward expectations of inflation, that is, today's expectation of what average inflation will be between 2009 and 2014. | 2,005 | 2 |
We include these types of price terms today in our forecasting equations, and they are important to forming our views of the inflation outlook and thus to the policy process. | 2,003 | 2 |
It is important to note, however, that although sound policy undoubtedly helped create the conditions for growth, macroeconomic policy cannot create growth itself. | 1,999 | 2 |
Countries differ in this regard, both in formal mandate and in actual practice.12 As an extensive academic literature shows, however, the general approach of inflation targeting is fully consistent with any set of relative social weights on inflation and unemployment; the approach can be applied equally well by "inflation hawks," "growth hawks," and anyone in between. | 2,020 | 2 |
In fact, the low funds rate has been necessary to promote growth that, to date, has been just sufficient to begin reducing substantial margins of slack in resource utilization. | 1,999 | 0 |
Conclusion The United States productivity growth spurt, realized to a much lesser extent around the world, can be attributed largely to a combination of an investment boom and a technological revolution. | 2,008 | 0 |
Under these circumstances, policymakers must be cognizant of the shortcomings of our published price indexes to avoid misguided actions that will provoke unintended consequences. | 2,000 | 2 |
Scholars disagree somewhat about the extent to which policymakers of the time tried actively to take advantage of this supposed tradeoff, but these ideas likely provided part of the intellectual rationale that made the authorities willing to allow inflation to rise throughout the 1960s and in the early 1970s. | 2,006 | 2 |
Another reason for the reliance on judgment in the forecasting process is the practical requirement that the forecast for inflation be consistent with the staff's overall view of the economy, including the forecasts for key economic variables such as wages, interest rates, and consumption spending. | 2,022 | 2 |
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